USD/CAD hit a low near 1.32725 yesterday, last seen in February, but the sudden reversal since then is likely to challenge some traders.
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As of this writing USD/CAD it is near the 1.33300 ratio as shown by the fast trading. Following yesterday’s decision by the US Federal Reserve not to raise interest rates, USD/CAD quickly sold off, reaching lows around 1.32725 last seen in February this year. However, since touching this lower ratio, USD/CAD has suddenly turned a bit higher and some traders may be wondering why this happened.
Traders need to understand that USD/CAD is a major currency pair that has a lot of institutional volume. The last two weeks of price action for USD/CAD have seen a definite lower trajectory, based on the notion that the US Federal Reserve will do exactly what it did last night – not raise the federal funds rate in June. The decision not to raise interest rates last night has already been priced into the Forex market, meaning USD/CAD sold off significantly ahead of the FOMC statement. USD/CAD was near 1.36500 at the end of May.
Also factoring into USD/CAD’s decline in last week’s trading was the fallout from the Bank of Canada’s decision to actually raise its lending rate last week, which saw the overnight rate increase by 0.25% to 4.75%. The Bank of Canada action created a strong bearish price in USD/CAD, and after yesterday’s confirmation of the US Federal Reserve’s tactics, financial institutions likely responded with a flurry of quick selling, knowing their outlooks had been met. What is to come in the next few months has then become a problematic thought regarding the US Fed.
- Support near 1.33200 to 1.33100 should be watched by traders; a drop below these ratios that can be sustained may be rather surprising today.
- That it dropped last night to a low not seen since February may signal further selling to develop, but behavioral sentiment may need to gain further momentum to create another wave of bearish momentum, the question is whether that will happen now and whether it will be sustained.
Traders have certainly been able to take advantage of the bearish trend of the past two weeks in USD/CAD, but after hitting medium-term lows, the currency pair could be difficult in the short-term.. Speculators may feel that there is more room for adventure below, but finding sticky lows may be difficult and perhaps using quick trades that use profits to pay off realistic targets is the best opportunity for the rest of the week.
Current Resistance: 1.33420
Current support: 1.33200
High Aim: 1.33610
Low Target: 1.32810